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Ethiopia has granted its first telecommunications license for $ 850 million to a consortium that includes Vodafone from the United Kingdom in what could herald the start of an opening of Ethiopia’s closed economy.
The consortium, led by Kenya’s Safaricom with Vodafone and Vodacom, also includes British financial development agency CDC and Japan’s Sumitomo. An offer for a second South African MTN license for $ 600 million was rejected as it was too low and the license will be withdrawn again.
The opening of what is the largest telecommunications monopoly in the world in a country with a rapid growth of 114 million people had been considered by the Ethiopian government as the “Agreement of the century”.
But potential bidders were left behind by restrictions on offering lucrative mobile money services and by the government’s insistence that new entrants build their own infrastructure or lease it to Ethio Telecom, the state monopoly, instead of using operators. of third party tower.
Some bidders were also believed to be suspicious of the unstable political situation after the federal army moved to oust the government in the Tigray region last November.
According to telecom analysts, companies that had shown initial interest, including Orange from France and Etisalat from the UAE, are expected to take a second look when the license is withdrawn.
Since the initial offer was closed, the government has softened its opposition to mobile money, saying new entrants will be able to offer such services within a year, subject to central bank approval.
Abiy Ahmed, the prime minister, said in a tweet on Saturday that the Safaricom-led consortium represented the largest foreign direct investment in the country’s history. Ethiopia has grown almost double-digit for much of the last twenty years, based on an Asian-inspired development model that prevented foreign capital from controlling the “dominant heights” of the economy. , such as banking and telecommunications.
Abiy said the new consortium would invest more than $ 8 billion in building a network over the next decade.
Brook Taye, a senior adviser to the finance ministry and part of the team overseeing the privatization, said the successful consortium had also pledged to launch a low-orbit satellite to cover the entire country in 2023 The new investment would create between 1.1 and 1.5 million jobs, he said.
One person familiar with the bidding process said both investment and employment were fantastic, motivated by the desire to present good news ahead of next month’s scheduled national elections. “There’s no way to make money if you invest $ 8 billion,” the person said. “I think they just get the numbers out of the air.”
Safaricom employs about 5,500 people in Kenya, a country with an economy similar to that of Ethiopia, with about $ 95 billion, and a population of 52 million, just under half the size.
However, Safaricom’s sustainability report stated that its services supported the employment of more than a million people through its “broader economic impact,” a figure that employers take into account. able to make a living thanks to the telecommunications ecosystem.
Brook said the second license would be withdrawn “very soon,” possibly with new adjustments to the rules to make it more attractive. Potential first-round bidders complained about changing the rules, including a lack of clarity about interconnection tariffs, which were reduced shortly before bids were won.
Brook denied that the tender had been opaque and said “this is the most transparent process that has ever happened in Ethiopia.” He said the sector would open up even more “so we believe there will be a very successful second bid”.
Ethiopia also plans to sell a 40% stake in Ethio Telecom, which has 46 million subscribers, by the end of this year.
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